A Guide to Understanding Certified Payroll Reports

Certified payroll reports are comprehensive payroll records that contractors must submit for federally funded construction projects, proving compliance with prevailing wage laws.

In 1931, the US Congress passed the Davis-Bacon Act to protect workers. Back then, contractors bidding on government jobs would try to win by offering low bids. These bids were made possible because the contractor planned to pay their employees minimum wages.

The act established “the prevailing wage”. The prevailing wage is the locally determined wage paid to workers performing similar work in the geographic area of the government project. The government mandated that contractors working government jobs had to pay their workers at least the prevailing wage.

The Davis-Bacon Act also requires certified payroll reports to verify that contractors are paying their workers the prevailing wage rate while they work on federal construction projects.

This guide examines the essential components of certified payroll reports, reporting requirements, and contractor compliance obligations for both federal and state projects.

What Is The Davis-Bacon Act?

The Davis-Bacon Act is a federal law that establishes prevailing wage requirements for contractors working on federally funded construction projects.

It requires contractors and subcontractors to pay prevailing wages and, potentially, provide benefits to workers employed on public works construction projects. Covered workers include laborers, mechanics and other construction professionals.

The U.S. Department of Labor (DOL) determines the prevailing wage based on the wages and benefits paid to workers in similar trades and occupations in the same geographic area.

The Davis-Bacon Act requires contractors and subcontractors to maintain accurate records of hours worked and wages paid to their employees. Contractors are required to submit weekly payroll documentation to the contracting agency.

The purpose of the law is to prevent contractors from undercutting local wages. Understanding Davis-Bacon prevailing wage requirements is essential for compliance.

Construction companies working on federal government contracts valued at $2,000 or more must submit certified payroll reports. The requirement applies whether the federal government partially or fully funds the project.

Federal Certified Payroll Requirements

Federal certified payroll requirements mandate weekly reporting of wages, classifications and hours for workers on qualifying government-funded projects.

For federal construction projects valued at $2,000 or more, contractors must comply with the Davis-Bacon Act’s certified payroll requirements. These projects include any work that is fully or partially funded by the federal government.

Federal certified payroll submissions require:

• Appropriate prevailing wages: The U.S. Department of Labor determines prevailing wages for certain federal jobs and on the report, there must be an indication that the correct wage is being assigned
• Standardized WH-347 form: The Department of Labor’s Wage and Hour Division issues this uniform reporting template, which creates consistency across all federal projects and enables efficient government oversight
• Weekly reporting: Contractors must submit reports every week throughout the project
• Submissions to government agencies: Reports are submitted via print or electronic submission to the Department of Labor, creating a compliance verification system across all involved parties

The federal government maintains strict enforcement, and violations can result in debarment, contract termination and prosecution.

State Certified Payroll Requirements

Many states have enacted their own prevailing wage laws, commonly known as Little Davis-Bacon Acts. These state laws apply to construction projects funded solely by state money, such as local school construction, state highway repairs, or municipal building projects.

State-certified payroll requirements typically include:

• State-specific forms: While many states use forms similar to the federal WH-347, some require their own state-designed forms or mandate electronic submission through state portals
• Varying project thresholds: Some states apply prevailing wage laws to projects as small as $1,000, while others have higher thresholds than the federal $2,000 minimum
• State wage determinations: Each state conducts its own prevailing wage surveys and publishes wage rates that may differ significantly from federal Davis-Bacon rates for identical work in the same location
• Different job classifications: States may recognize more detailed or different job classifications than federal determinations
• Submission to state agencies: Contractors typically submit reports to the state’s Department of Labor or the specific state agency managing the project

Contractors should verify their state’s specific requirements before bidding on state-funded projects, as regulations vary significantly by jurisdiction.

Key Differences: Federal vs. State Certified Payroll

Federal and state certified payroll requirements follow the same core purpose but differ in how they are applied and enforced.

Understanding the distinctions between federal and state certified payroll requirements is essential for contractor compliance:

• Submission destination:

• Federal projects: Submit to the federal contracting agency
• State projects: Submit to the state Department of Labor or designated state agency
• Forms and formats:

• Federal projects: Use the standard WH-347 form
• State projects: May require state-specific forms or electronic systems
• Wage rates:

• Federal projects: Use U.S. Department of Labor wage determinations
• State projects: Use state-published wage determinations, which can be higher or lower than federal rates for the same work
• Project thresholds:

• Federal: Generally $2,000 or more
• State: Varies by state, from $1,000 to higher amounts
• Reporting frequency:
• Both typically require weekly submissions, though some states may have different schedules

Since each state administers its own prevailing wage laws, contractors should contact the agency managing their specific project for precise submission instructions and state-specific requirements.

What Are Certified Payroll Reports?

Certified payroll reports verify that contractors are paying prevailing wages on government-funded construction projects.

They document worker classifications, hours worked, wages and fringe benefits for each reporting period, giving government agencies a clear record of how workers are paid.

Contractors must maintain these reports throughout the project to demonstrate ongoing compliance with prevailing wage requirements.

Key Components of Certified Payroll Reports

Certified payroll reports contain detailed information about hours worked, wages paid and benefits provided to each worker on the project during the reporting period.

Here are some fields typically included:

• Job information: Includes details about the specific construction project, such as the project name, location and funding agency
• Employee information: Includes the names of every employee working on the project, their job classification(s) and the number of hours they worked during the pay period
• Wage and benefit information: Includes information about the wages and benefits paid to each employee, including hourly rates, overtime rates, fringe benefits and any deductions made
• Compliance information: Documentation that proves the contractor or subcontractor complies with federal and state prevailing wage laws
• Certification: All payroll reports must be signed and certified by the contractor or subcontractor, attesting that the information provided is accurate and complete

The Statement of Compliance

When contractors sign the Statement of Compliance on the WH-347 form, they make two key promises to the Department of Labor:

1. All workers who performed labor on the project received the proper prevailing wages and benefits for their classification and location
2. The company has complied with all requirements of the Davis-Bacon Act and applicable regulations

This signature tells the federal government that everyone got paid correctly for their specific job type and location.

The WH-347 Form: Your Certified Payroll Report

The WH-347 form serves as the standard certified payroll report for federal construction projects. Issued by the Department of Labor’s Wage and Hour Division, this standardized form is the official document contractors must submit weekly.

The purpose of the WH-347 is to record each worker’s hours, job classification, wages and benefits.

Contractors must submit the form weekly. It includes the contractor’s employees and any subcontractors working on the project. This ensures all project teams are properly compensated.

If your company is working on multiple government projects, a WH-347 is required for every job, and you’ll need to provide the following information:

• Name and last four digits of each employee
• Their wage
• Number of exemptions
• Work classification
• Day and date of work
• Hours worked each day
• Total hours (including overtime hours)
• Rate of pay
• Gross amount earned
• FICA
• Withholding tax
• Total deductions
• Net wages paid for the week
• Employees performing more than one craft
• The reason for the wage exception

Use the Wage Determinations Online Search (WDOS) to find each prevailing wage by the Davis-Bacon Act wage determination number (WD). If you don’t have the WD number, search the WDOS by state or type of construction work.

(Take a look at a Sample Certified Payroll Report: An Example of a WH-347 Form)

Davis-Bacon Act Violation Penalties

Davis-Bacon Act violations can result in serious financial and legal consequences for contractors.

The DOL enforces harsh penalties if your company neglects to submit the forms or provides incorrect information. These include:

• Debarment from federal construction contracts for up to three years, severely limiting the ability to bid on future government projects
• Withholding of contract payments to compensate workers for unpaid wages
• Contract termination
• Civil or criminal prosecution for falsifying certified payroll records, with potential fines and imprisonment

You can challenge the verdict before an administrative law judge and appeal that decision to the Administrative Review Board (ARB) and the federal courts.

Exceptions to Prevailing Wage Requirements

Exceptions to prevailing wages in commercial construction can vary depending on each jurisdiction’s specific prevailing wage laws and regulations.

Common exceptions include:

• Small projects threshold: Prevailing wage laws may not apply to commercial construction projects below a certain cost or size threshold. The governing jurisdiction typically defines this threshold.
• Public works exemptions: Some types of commercial construction projects, such as privately funded projects or certain types of improvements or renovations, may be exempt from prevailing wage requirements if they do not meet the criteria for public works projects.
• Owner-occupied projects: If a commercial property owner intends to occupy or currently occupies the building being constructed or renovated, prevailing wage laws may not apply.
• Designated enterprise zones: Certain jurisdictions may have designated enterprise zones where prevailing wage requirements do not apply to incentivize economic development or investment in specific areas.
• Public emergency projects: Prevailing wage requirements may be waived for commercial construction projects that are considered emergency projects necessary to protect public health, safety or welfare.

Contractors and employers should consult the prevailing wage laws and regulations in their specific location to determine the prevailing wage requirements and any applicable exceptions for their government construction projects.

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